Corporate America has yet to figure out how to deal with “yes” men and women – the people who are fearful of delivering any kind of news that might upset their superiors. As such, projects continue to fail, costing companies time and money.
We completed 14 studies that have been published in scholarly articles during the last 15 years and found five key takeaways about accuracy of project reporting. Knowing and understanding project reporting dynamics will help companies move away from disastrous implications.
1. Executives Cannot Rely on Project Staff to Accurately Report Project Status. Providian Trust CEO Stephen Walsh thought he had nothing to worry about with a $22 million computer upgrade he authorized. His employees assured him that the project was making good progress. Only it wasn’t. Providian became so invested in software that wasn’t working that it cost them $36 million to fix the problems with an upgrade.
Employees don’t like giving bad news to the boss. It goes back to the idea that executives may “shoot the messenger.” Employees are on the weaker side of the power relationship and as such always tend to put a positive spin on things. This is especially true if the organizational climate is not receptive to bad news. What’s an executive to do? As Ronald Reagan once said “trust, but verify.” Solicit the opinion of others who are close to the project. Obtaining these views may very well give you a clearer picture of what is being transmitted.
2. People misreport for many reasons. Executives tend to think that only unethical people will engage in misreporting. While it is true that we found those with greater sense of personal morality are more willing to report bad news when a project involves a defective product that has the potential to harm others, it also revealed key traits that might signal that someone is more prone to misreporting. For example, people who have a higher propensity for risk-taking or higher career aspirations are more likely to misreport. So, too, are folks who are more optimistic and see the “glass half full.”
To combat this, employers should carefully consider the composition of project teams. Don’t pack teams exclusively with optimists and risk takers.
3. Audits won’t necessarily find the mistakes. Once auditors are involved, there’s a propensity toward even less sharing of information. Employees growing distrust over being watched can lead to an environment where employees try to work against auditors. Our research showed that one of the factors that contributed to a project manager’s willingness to expose challenged or failing projects is trust in his or her supervisor. If employees feel they can trust the supervisor, they are more likely to accurately describe challenges the project is facing. If trust is low, adding in aggressive auditing procedures can actually lead to more misreporting
4. A senior manager overseeing a project may increase misreporting. Having a senior manager will help ensure that projects remain on the “front burner,” but it doesn’t mean there will be more transparency with project updates. In fact, we found the opposite. The more senior the manager, the less inclined subordinates are to report if a project is sinking. The reason is simple: subordinates don’t want to look bad in front of their bosses. Our research found that respondents were less willing to provide truthful status information if the project was the “brainchild of someone in senior management who has repeatedly championed the project.”
An effective way around this is to first be open and honest when dealing with employees. Research showed employees were more truthful when they perceived employers were being honest and transparent. We also think it worthwhile to set up a Project Management Office, whose leader is trained to act as a mentor to the organization’s project managers. This way the PMO can focus on developing that relationship, which ultimately can help illuminate the “true” status of the project.
5. Executives ignore bad news. Sometimes it’s not the accuracy of the reporting, but it’s just not the answer that an executive wanted to hear. We observed this phenomenon of executives either ignoring or downplaying bad news in several studies.
Overconfidence in, and escalation of, commitment to a project are occupational hazards in the C-suite. Both have played a role in many corporate disasters over the past 20 years. Listen and keep an open mind about what employees are telling you. They, too, have a stake in the project’s success.
This article is based on research that originally appeared in the MIT Sloan Management Review. It was co-authored by H. Jeff Smith, George and Mildred Panuska Professor in Business at Miami University in Oxford, Ohio; Charles L. Iacovou, incoming dean at Wake Forest University School of Business; and Ron L. Thompson, professor of management at Wake Forest University School of Business in Winston Salem, NC.